COVID-19: LEGAL CONSIDERATIONS FOR BUSINESSES IN MAURITIUS
The World Health Organization (WHO) categorized the severe acute respiratory syndrome novel coronavirus 2 (COVID-19) as a pandemic.
There were no reported cases of COVID-19 in Mauritius until Thursday 19 March 2020 when three cases were declared. Over the next day, the Mauritius Government announced seven further cases of the infection on the island. As of Monday 23 March 2020, there are 28 confirmed cases and two casualties linked to the virus.
The following measures have been taken:
- A curfew order, to prevent the spread of the COVID-19 across the country and to make citizens respect the national containment protocol took effect on Monday 23 March 2020 at 20h00 local time and will continue until Thursday 2 April 2020 at 20h00. No one will be allowed outdoors, unless he or she holds a valid permit.
- Access to Mauritius for all passengers including Mauritian nationals at the airport is denied for the next 15 days. Similarly, all cruise ships have been denied access at the port. This applies to commercial passenger travel. Cargo freight is not presently affected.
- Mauritius nationals returning to the country are being placed in quarantine.
- There is a lockdown of all academic intuitions, that is pre-primary, primary, and secondary schools, technical and professional training centres and tertiary institutions as a preventive measure until further notice.
- All offices and businesses, except supermarkets and pharmacies, are closed. Supermarkets and pharmacies will be opened only during specific hours.
The Prevention and Mitigation of Infectious Disease (Coronavirus) Regulations 2020 (Regulations) have been passed as a matter of emergency to supplement the Quarantine Regulations 1953 and to deal with the increasing threat of wider scale propagation of the virus. The Regulations create authority for:
- holding people who are infected or likely to be infected in isolation or quarantine;
- carrying out screenings tests;
- entering premises, ships and aircrafts to ensure compliance with the Regulations;
- closing down of premises;
- declaring a restricted area; and
- declaring a curfew order.
As of Friday, 20 2020, Government has declared a national confinement. All offices and businesses, except supermarkets and pharmacies, must be closed. All inhabitants are required to stay indoors and should leave their houses only if they are in of need supplies or medication, or for emergencies. Only essential services will continue to run.
We expect the situation to evolve further in the days to come if evidence of a wider propagation surfaces.
According to estimates by the Bank of Mauritius and Business Mauritius, the impact of COVID-19 may slow down economic growth by between 0.1% and 0.3%. This projection is likely to be revised as the disease spreads.
To assist our clients, we have highlighted (very briefly) certain areas and issues to be considered by businesses, investors and transaction teams during this period. Click here to read the article. We have focussed on those that we think must be addressed immediately as they touch on aspects of business continuity, financing, revenue generation and workforce management. These include:
Conduct of Business: The ways in which businesses could be run through remote working, use of electronic documents, forms and digital signatures and conduct of board and shareholder meeting by audio-visual and/ or electronic means. We also assess the means by which company formations and licence applications could be sustained though electronic registries.
Contractual Implications: The potential consequences arising from breaches, (ii) the contractual provisions which may aid in the suspension, variation or termination of contractual obligations and (iii) the relevance of ‘force majeure’ clauses.
Employment: The effects of the pandemic on existing employment relationships and our guidance for employers during the affected period.
Data Protection: The handling of personal data and sensitive personal data by businesses as data controllers and processors, and our guidance on compliance with legal requirements in relation to data protection.
Banking: The measures taken and recommended by the Central Bank to assist businesses with cheaper access to funding and moratoria.
Consumer Matters: Issues likely to arise from the run on consumer goods, potential supply disruptions and price escalation. We also consider the avenues to cancel certain services and the restrictions on business in charging cancellation fees.
Electronic records and legal documents executed using electronic signatures are legally valid and enforceable under the Mauritius Electronic Transactions Act 2001, save for any enactment requiring writing or signatures in writing in:
- the execution of a will;
- a negotiable instrument;
- a power of attorney;
- a contract for the sale or other disposition of immovable property, or any interest in such property;
- the conveyance of immovable property or the transfer of any interest in immovable property or a document of title.
It is recommended that legal contracts be executed using electronic signatures for all permissible contracts rather than doing ‘signing’ meetings. It is also recommended to consider appointing additional authorized signatories and obtain the required approvals to do so.
Filings and Registrations
We expect that company formations, filings and notices to the Registrar of Companies and Financial Services Commission (FSC) would continue to be possible, although we anticipate delays in processing time of some filings. The FSC issued a communique on 20 March 2020 to state that it will continue to engage with its licensees and market participants more via remote technology during the upcoming period and that it encourages stakeholders to contact them by email with concerns and questions. The FSC also stated in order to ensure continuity of financial services, it will show flexibility towards companies which may face challenges in meeting their forthcoming reporting obligations including regulatory filings and that it will consider, on a case by case basis, such measures that may alleviate the immediate regulatory burden for financial institution during these challenging times.
Companies and their secretaries would have discharged their responsibilities by making online filings and making payments of any taxes, charges or fees through dedicated payment gateways established for such services. Licensed management companies are taking steps to work remotely, and should have adequate relocation and business continuity, and be able to process applications for global business licences and authorised companies, ongoing filings and tax. Clients of management companies should enquire with their client executives whether such arrangements are in place to avoid any potential penalties.
Care must be taken in the case of entities other than companies i.e. foundations, limited partnership and limited liability partnerships, for which online filings may not be possible. Clients should ensure that the agent has capacity to carry out physical filings for these entities.
Conduct of board, annual and shareholder meetings/ AGMs
The Companies Act has flexibility for shareholder meetings, and even annual general meetings, to be held in person, or to be attended by proxy. Shareholder meetings may also be held though electronic or audio-visual means where all those attending can simultaneously hear and speak to one another. Furthermore, while at least one shareholder meeting must be held annually, private companies may dispense with this requirement by passing written resolutions consented to by not less than 75% of votes. Such resolutions can nowadays be circulated and signed electronically through online signature platforms.
Meetings of the board of directors is the motor for the running and management of a company. Disruptions in management meetings can seriously impede the running of the business, more so, in time of crisis like the present where boards and senior management are required to meet on a daily basis.
While it is recommended that all businesses meet as frequently as desirable for the smooth running of the business, the Companies Act allows board meetings to be held via telephonic, audio-visual or electronic means. Although a state of emergency and travel bans have been put in place, and the consideration for public safety would and should, in the circumstances override recommended best practices, businesses should nevertheless ensure that the meetings originate and are minuted in Mauritius, with the presence through telephonic, audio-visual or other electronic means of such number of directors from Mauritius as would satisfy the minimum statutory substance requirements, and work together with their service providers on-the-ground to comply with minimum standards.
COVID-19 threatens the ability of contracting parties to meet their obligations or perform as required under an agreement regulating their relationship. Faced with a public health crisis largely beyond their control, contracting parties may find it impossible to fulfil these obligations on time or at all. At the same time, the parties may themselves face non-performance or delayed performance by counterparties. The impact on businesses in these uncertain times may be significant.
Parties should review their agreements to assess and seek to limit the risk of their non-performance or non-performance by a counterparty and, in doing so, should consider potential disruptions which might result in a potential breach of an agreement. The consequences of such breach must be considered and a plan must be implemented to mitigate such consequences.
The type of damages must be assessed as they may be consequential damages arising from non-performance as such loss was never, at the time of entering the agreement, considered by the parties.
Force Majeure/ MAE
A number of contracts include a ‘force majeure’ or ‘material adverse effect’ clause. A force majeure clause in an agreement typically excuses non-performance of contractual obligations when an extraordinary event or circumstances beyond the control of the parties (i.e. a force majeure) prevents performance by one or both of the parties. A ‘material adverse effect’ (MAE) entitles one party to avoid an obligation or accelerate the performance of that obligation on the grounds of there being something adversely affecting the business of the other party.
Being excused from performance or rescinding performance while the event continues should help a party avoid being placed in breach and limits the exposure to damages being claimed for non-performance. Determining whether COVID-19 constitutes a force majeure or MAE will require careful consideration of the force majeure clause relied upon, the contractual obligation in question and the reasons for non-performance.
Should a party wish to invoke a force majeure or MAE clause, it should confirm whether the clause requires it to give notice of force majeure and, if so, when notice must be given. One should be careful to meet the requirements for such notices as precisely as possible including the address to which it must be sent and what level of detail or information the notice should contain.
Force majeure and MAE may at times be the subject of negotiation between parties. With new hindsight of the overwhelming effects of phenomenon as worldwide pandemics, we expect that special consideration would be given now to the drafting of such clauses in contracts. Likewise, we expect exclusion clauses in medical or life insurance policies to be revisited to factor in the advent and effects of worldwide pandemics.
In the absence of force majeure in a contract, it could nevertheless be invoked under law. As per Article 1147 of the Mauritius Civil Code, a contracting party is liable to damages for non-performance of obligations unless he/ she/ it can show that the default was due to an event beyond his/ her/ its control and Article 1148 likewise provides for an exoneration of liability of the contracting party where the latter has been unable to perform his/ her/ its part of the bargain as a result of a force majeure. In order to determine the existence of force majeure, a court of law will usually consider whether the event is:
- unavoidable; and
Guidance for parties
Reliance on force majeure at law may be quite onerous, and as such, the following could be considered:
In relation to new contracts:
- Parties may consider including a boilerplate clause on force majeure and determine whether the clause should include pandemics, curtailment of transportation services, disruption of overseas supplies and travel restrictions.
- Parties should ensure that the clause provides for a notification requirement and deals with the issues that may arise if a force majeure event (such as COVID-19) occurs e.g. care of the project pending completion works.
- Parties should negotiate clear MAE provisions carefully considering whether or not the outbreak, its possible duration, and its forecasted effects for the business, should fall within the provisions.
In relation to existing contracts:
- Parties should review their existing contracts to identify whether their ‘force majeure’ clauses and/ or MAC or MAE provisions cover pandemics such as COVID-19 and the procedure that must be followed by a party seeking to invoke the provisions.
- Parties should also confirm whether, for an alteration to be made (even if a temporary change due to COVID-19), an exchange of e-mails or an oral variation of the contract is sufficient or will be precluded by a non-variation clause that requires any change to be agreed in writing and signed by the parties.
- It is also advisable for parties to review potential exposure to loss or damages – check whether there is a damages limitation clause or an exclusion of damages clause. A decision should then be made regarding the approach, whether to initiate the provisions in the agreement or to commence mitigation measures, etc.
- Mitigation - Parties should take pro-active steps to mitigate their commercial risks and losses as a result of COVID-19. In the event of non-performance of a contract, a plaintiff must take all reasonable steps to mitigate the loss. A plaintiff will not be able to recover for avoidable loss.
The Occupational Safety and Health Act 2005 imposes a statutory duty on employers to ensure, so far as is reasonably practicable, the safety, health and welfare at work of all employees. Employers must, in particular, provide and maintain, so far as is reasonably practicable, a working environment that is safe and without risks to health.
Failure to do so would constitute an offence and employers may be liable to a fine not exceeding MUR 75 000 and to imprisonment for a term not exceeding one year.
To address concerns created by COVID-19, employers are advised to:
- monitor and ensure full compliance with any government guidance;
- direct employees to not undertake work-related travel to affected countries;
- obtain travel declarations from employees on their travel history; and
- provide sanitisers and information about COVID-19 to employees.
Other Relevant Measures taken by the Government
The cabinet of ministers have agreed to take the following measures:
- All work permits that would expire in 2020 would be automatically extended up to 31 December 2021;
- to minimise human contacts, Government would give full support to promote the work at home scheme;
- The Catering and Tourism Industries (Remuneration) Regulation 2019 would be amended to provide for:
- time off to be granted to workers of that industry in lieu of payment of overtime during the period of the outbreak; and
- a worker to resume work, with his/her consent, before a lapse of 11 hours after having completed a normal day’s work.
- The Private Hospitals and Other Related Health Services (Remuneration) Regulations 2019 would be amended to provide that a worker might, with his consent, work up to 12 hours a day instead of eight hours.
- To make new regulations to provide for payment of wages to workers, who are placed in quarantine, to be offset against their leave entitlement.
Employee Compensation in Quarantine
The cabinet of ministers have agreed to provide for a new regulation to allow the payment of wages to workers who are placed in quarantine to be offset against their annual leave entitlement. The regulation is being prepared by the Ministry of Labour, Industrial Relations and Employment.
Employees Diagnosed with COVID-19
Employees diagnosed with COVID-19 must be sent home and directed not to re-attend work until they have medical clearance. Employers should immediately vacate the section of the premises where the affected employee was present, clean and disinfect that section of the premises.
Under the Workers’ Rights Act 2019, a full-time employee whose basic salary is not more than MAU 600 000 in a year and:
- who remains in continuous employment with the same employer for a period of 12 months is entitled to 15 days’ paid sick leave;
- who remains in continuous employment with the same employer for a period of six consecutive months and who has been present on all the working days during that period is entitled to one day’s paid sick leave during each subsequent month up to the twelfth month.
An employee whose basic salary is more than MAU 600 000 in a year has no statutory right to paid sick leave. Any sick leave entitlement for any such employees will be in accordance with their respective employment agreements.
Accordingly, employees who contract COVID-19 and who are entitled to paid sick leave can take their sick leave. Any leave in excess of the paid sick leave entitlement will be unpaid.
Employees who have been in contact with the affected employee must also be sent home to be placed in quarantine. Any work from home possibility for any such employee must be explored and implemented.
During the mandatory confinement period, there will be no deduction on the salaries of employees of companies or business that are forced to close.
For the purposes of transparency, it is recommended that employers inform employees of any confirmed case of COVID-19 in the workplace. However, personal health information falls within the special categories of personal data in the Data Protection Act 2017. Accordingly, employers must take care to preserve the privacy of the employees who have contracted COVID-19 and not to name them.
Variation of Terms of Employment
An employer cannot unilaterally vary the terms of employment of an employee. Any variation to the terms of employment must be agreed by both the employer and the employee.
If the situation worsens, and an employer has to reduce the number of workers in its employment or close down its enterprise, it must notify and negotiate with:
- the trade union, where there is a recognised trade union;
- the trade union having a representational status, where there is no recognised trade union; or
- the employees’ representatives, elected by the employees where there is no recognised trade union or a trade union having representational status.
The purpose of the negotiation would be to explore the possibility of avoiding the reduction of workforce or closing down by any of the following means:
- restrictions on recruitment;
- retirement of workers who are beyond the retirement age;
- reduction in overtime;
- shorter working hours to cover temporary fluctuations in manpower needs;
- providing training for other work within the same undertaking; or
- redeployment of workers where the undertaking forms part of a holding company.
The negotiator of the employee and the employer may agree on an alternative solution or on the payment of a compensation by way of a settlement. Where no agreement is reached or where there has been no negotiation, the employer must give written notice to the Redundancy Board together with a statement showing cause for the reduction of workforce or closure of enterprise at least 30 days before the intended reduction or closing down.
The Redundancy Board must complete its proceedings within 30 days from the date of notification by the employer. Any extension must be agreed by the parties. If the Redundancy Board is of the view that the reduction of the workforce or closing down is unjustified, the employer would be required to pay severance allowance at the rate of three months’ remuneration per year of service or in the case of a reduction of workforce, reinstate the employee in his/ her former employment following an order by the Redundancy Board with the consent of the employee. In the latter case, the employee shall be entitled to the payment of remuneration from the date of termination of employment to the date of reinstatement.
The procedures mentioned above apply to an employer who employs not less than 15 employees or having a turnover of at least MAU 25 million.
Collection and Processing of Personal Data
Information that will be collected will include information about the health status of individuals (data subjects) including whether they have been tested positive or negative, travel information, information about those individuals who have self-isolated and in certain instances, information about family members who have self-isolated or who have shown symptoms.
This information will be considered as personal data under the Data Protection Act of Mauritius 2017 (DPA) and the health data collected is considered as a special category of personal data under the DPA. The collection and processing of personal data and, in particular, special categories of personal data will be subject to various legal restrictions that businesses must adhere to.
Under the DPA, businesses should only process personal data if they have implemented appropriate security and organisation measures and the data may be processed only for lawful purposes which include where the individual has consented for the processing for one or more specified purposes, for compliance with any legal obligation which the employer is subject to or for the performance of a task carried out in the public interest or in the exercise of official authority vested in an employer.
In relation to special categories of personal data, additional requirements must be met under the DTA for its processing, for instance, the processing is necessary for the purpose of preventive or occupational medicine, for the assessment of the working capacity of an employee, medical diagnosis, the provision of health or social care or treatment or the management of health or social care systems and services or pursuant to a contract with a health professional and the data must be processed by or under the responsibility of a professional or other person subject to the obligation of professional secrecy under any enactment.
Businesses must also notify the Data Protection Commissioner that it intends to hold, special categories of personal data, if they have not done so at the time of its application for registration as data controller or data processor.
Guidance for Businesses
Businesses should only collect personal data of their employees if it is strictly necessary and essential to its operations and safety of the workplace. An employer may either request for the consent of its employees for such collection or rely on the public interest exemption.
Where businesses collect the health information of their employees, they should ensure that they have in place appropriate data security measures such as encryption to protect the data collected and that such data is collected by a professional or other person subject to the obligation of professional secrecy under any enactment.
Businesses must inform the Data Protection Commissioner that they will collect and store a special category of personal data (if this has not been previously done).
Special Relief and Business Support Measures
The Bank of Mauritius has introduced a series of measures to mitigate the downturn in economic activity in the wake of COVID-19. To assist Mauritian business across all economic sectors, the Bank of Mauritius has introduced a support programme containing these measures:
- The Repo Rate is reduced by 50 basis points to 2.85% per annum.
- Special Relief Amount of MAU 5 billion through commercial banks to meet cash flow and working capital requirements of economic operators which are being directly impacted by COVID-19.
- Special Relief Amount through commercial banks from 23 March 2020 up to 31 July 2020 to all sectors of activities impacted by COVID-19 including SMEs.
- Capping of interest on such disbursements to impacted economic operators at a fixed rate of 2.5 % per annum.
- Moratorium of six months on capital and interest payments, with loan repayment period being two years.
- Cash reserve ratio reduced to 8% to allow commercial banks to further assist businesses directly impacted by COVID-19. The amount released after such reduction is to be held in escrow by the Central Bank to be used for any facility to be granted to any impacted economic operator.
Guidance for Businesses
Businesses must immediately run financial projections having in mind, worse case scenarios potentially presented by a long-term downturn of consumer demand, especially in areas of hospitality services, and supply shortages of produce and raw material for productions, and taking into consideration their ability to meet financial commitments and liabilities. Businesses likely to be heavily impacted should approach their bankers at the earliest to start discussing moratoria, extensions, and potentially re-financings on more lenient terms.
There has been consumer panic that has led to a run on essential products. We believe there is also a likelihood of suppliers overpricing essential goods, creating artificial shortages of supplies to the detriment of fair competition among businesses. These actions are likely to hurt consumers and businesses that depend on the affected supplies.
The Government has announced that it will invoke the provisions of the Fair Trading Act and potentially the Consumer Protection Act to prevent excessive buying and regulate supply. Potentially the Competition Commission of Mauritius (CCM) could monitor the market especially for, unjustified price escalations, hoarding and essential goods, and take regulatory action against businesses engaging in restricted trade practices.
Cancellation and Policies
With the ban on international travel and the recommendation against any non-essential domestic travel, there are likely to be cancellations across the board in the context of, amongst others, flight and hotel bookings. With internal movement being impeded, a number of consumers may be unable to pay their bills. Not everyone is subscribed to e-payments.
There is no clear right in Mauritius law for consumers to avoid cancelation penalties, surcharges or terminations of service for non-payment of bills, where such is clearly provided for in the contract. We expect that the consumer protection association and potentially government authorities may urge business to apply restraint in insisting on strict legal rights during the current period.
Potentially regulations could be passed under the Consumer Protection Act to outlaw inordinate penalties being imposed. Already some telecommunications providers have confirmed that there will be no disconnections or late payment surcharges during the current period until further notice. In some cases, packages are being extended free of charge.
As per the message of the Honourable Prime Minister, the Government, private sector and all Mauritians should work together to win the war against the invisible foe which is COVID-19. This is not a time for businesses to panic, but an opportunity for them to build resilience and work together to ensure a stable business and economic environment.
We expect that as our country and the world start to cope with this pandemic, new legal issues affecting business will occur rapidly. We will keep you updated on the impact of COVID-19 in the coming days and weeks, as the developments occur.